There is a sizeable chunk of people in Britain who find themselves richer than they ever thought they would be.
It’s unlikely they feel it, however, as their quarter or perhaps even half-a-million pounds is not in the bank.
Instead, it is locked in their home. The generation that struck it lucky in Britain’s housing boom lottery is now retiring.
Four decades of house price inflation – as shown by this chart using Nationwide House Price Index data – has delivered greater wealth to a generation of Britons that they ever thought they would have
They worked hard, paid their taxes and mortgages, rode out recessions, suffered endowment mis-selling, and stomached mortgage interest rates above 10 per cent.
So most feel they have earned the right to that property wealth delivered by a 40-year boom that saw UK house prices rise fifteen-fold.
But there are also many people of that same generation – and those retiring behind them – whose pension savings fall short of the comfortable retirement they want. These two groups don’t perfectly match.
Some have plenty for retirement, while some have much less housing wealth, especially as big number house prices are a phenomenon dominated by the south of the country and pockets of elsewhere.
But group people together and the circles overlap in a Venn diagram.
Added to the asset-rich, cash-limited mix is that the offspring of this baby boomer generation are struggling to get onto the property ladder or climb up it, due to those high house prices.
Britain is home to a generation of young workers, couples and families who are unable to buy the same homes that their parents could, despite having jobs of equal status. Inevitably, that means the Bank of Mum and Dad is asked to step in.
So, what’s the answer to all this?
‘Borrow till you drop’ appears to be the popular answer in the financial industry.
We’ve had equity release for some time, which while having grown substantially remains something of a niche product. But now a new breed of mortgages is on the horizon.
A loosening of the rules to allow interest-only mortgage lending into retirement will make it easier to tap into a home’s value.
Cash could be used to supplement income, clear debts, or hand the kids or grandkids some money.
As the interest is paid off each month, the debt will remain the same but not roll up and eat into a home’s value – as it does with most equity release loans – and the mortgage balance will be cleared when the borrower either sells up or dies.
That last element is the crucial bit of the jigsaw. These mortgages are expected to emerge as the financial watchdog has relaxed rules stating this was not an acceptable repayment method.
Our story drew plenty of criticism for such loans from readers, but if this new wave of mortgages arrives it is likely to prove popular.
The concept is difficult to square. On one hand it’s another element of the disturbing financialisation of our homes. I have wondered for some time what trick the banks and building societies could pull to deliver another credit event that pumps more borrowed money into property and keeps Britain’s overpriced housing market afloat.
We had the deregulation of the mortgage market in the 1980s, allowing the banks in, the growth of mortgage securitisation, the decline in interest rates from double digits, the cheap credit boom of the 2000s and then emergency base rate, quantitative easing and Funding for Lending, where could we go next?
House prices are almost as expensive as they have ever been compared to wages and two-earner households are needed to buy most homes. There aren’t that many levers left to pull to give the property market another leg up.
Unless, of course you pull the one marked ‘the baby boomers housing equity’.
So the cynic in me says ‘this is not a good idea’.
But then there is the personal angle. Such mortgages could actually make a material difference to some people’s lives. And who would deny someone a more enjoyable retirement, or the chance to help their children buy homes while they can still come round for dinner?